Zanzibar inks PSA for gas exploration to start

Saturday November 17 2018

In Summary

Zanzibar has signed a Production Sharing Agreement with a United Arab Emirates company for the exploration of natural gas.

The estimated value of Tanzania’s already-found natural gas reserves was put at $20 billion. In the PSAs, the company is permitted to use the money from produced oil to recover capital and operational expenditures.

With a population of about 1.4 million people, the Zanzibar economy mostly depends on tourism and international trade.

Zanzibar has signed a Production Sharing Agreement with a United Arab Emirates company for the exploration of natural gas.

The deal was signed by the Zanzibar’s Minister for Land, Water, Environment and Settlements Salama Aboud Talib, director general of the Zanzibar Petroleum Development Corporation (ZPDC) Mwanamkaa Abdulrahman Mohamed and chief executive of RAK Gas LLC Kamal Mohamed Ataya at the State House in Zanzibar.

Also present at the signing ceremony were Zanzibar President Dr Ali Mohamed Shein and the ruler of Ras Al Khaimah Sheikh Saud bin Saqr Al Qasim.

The targeted Zanzibar block has undergone several field activities including pre-drilling aerial exploration over and deployment of offshore infrastructure for drilling of test wells.

Former holders of exploration rights for the Zanzibar block — Antrim Energy of Canada — describes project owners RAK Gas LLC as “the state natural gas utility of the Emirate of Ras al Khaimah in the United Arab Emirates which has interests in two offshore blocks in Ras al Khaimah as well as holding interests in exploration blocks in East Africa and Egypt, including the East Pande block in Tanzania.”

“The Pemba-Zanzibar block has a proven hydrocarbon system, as evidenced by the Tundaua oil seep on Pemba Island and oil shows in previous exploration wells. Multiple source rocks and petroleum reservoirs are anticipated and numerous prospects have been mapped,” the Antrim says.

Further describing the potential of the Zanzibar block, whose prospects were boosted on October 23 after RAK and the Zanzibar government signed the PSA, Antrim says in its communiqué that “approximately 75 per cent of the licence lies in water depths of less than 200 metres, with the islands of Pemba and Zanzibar providing potential for on-shore directional drilling.”

Ras Al Khaimah company has established a subsidiary called RAK Gas Zanzibar On the Isles to meet legal requirements.

Other supporting firms are the UK’s Bell Geospace Enterprises Company Ltd, which conducted the aerial survey beginning early last year, and Brunswick Zanzibar Ltd.

There has been a debate in the Tanzanian parliament whether such agreements should be made available for public scrutiny.

The Washington-based, Global Financial Integrity initiative recently advised Tanzania ought to be careful while signing PSAs for gas and oil projects with multinational companies to ensure citizens get a fair deal.

The estimated value of Tanzania’s already-found natural gas reserves was put at $20 billion. In the PSAs, the company is permitted to use the money from produced oil to recover capital and operational expenditures.

The remaining money is known as “profit oil” and is split between the government and the company. In most PSAs, changes in international oil prices or production rate affect the company’s share of production.

With a population of about 1.4 million people, the Zanzibar economy mostly depends on tourism and international trade. The Isles have been a target for high-class tourists, competing closely with the Vanilla Islands of the Seychelles, Mauritius and the Maldives.